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Questions and Answers
What is another term for the Guaranteed Insurability Rider?
What is another term for the Guaranteed Insurability Rider?
- Guaranteed Purchase Option (correct)
- Future Payment Option
- Disability Income Rider
- Income Protection Rider
At what age do most companies typically stop allowing the additional purchase option to be exercised?
At what age do most companies typically stop allowing the additional purchase option to be exercised?
- Age 45
- Age 40
- Age 55
- Age 50 (correct)
What must the insured meet before each purchase to prevent over-insurance?
What must the insured meet before each purchase to prevent over-insurance?
- Income Declaration
- Health Assessment
- Insurance Review
- Earnings Test (correct)
How often is the insured typically provided the option to purchase additional coverage?
How often is the insured typically provided the option to purchase additional coverage?
What determines the premium for the additional amount of insurance purchased through this rider?
What determines the premium for the additional amount of insurance purchased through this rider?
What is the primary purpose of an impairment or exclusion rider?
What is the primary purpose of an impairment or exclusion rider?
Which statement correctly describes how impairment riders affect insurance coverage?
Which statement correctly describes how impairment riders affect insurance coverage?
What might happen if a physician has a back injury when applying for a disability policy?
What might happen if a physician has a back injury when applying for a disability policy?
What factors does the underwriter consider when issuing a policy with an exclusion rider?
What factors does the underwriter consider when issuing a policy with an exclusion rider?
What is a defining feature of the impairment rider compared to other types of insurance riders?
What is a defining feature of the impairment rider compared to other types of insurance riders?
Why might someone need to use an impairment rider to obtain insurance?
Why might someone need to use an impairment rider to obtain insurance?
What happens to the premium when an impairment rider is added to a policy?
What happens to the premium when an impairment rider is added to a policy?
When may an exclusion rider be made permanent?
When may an exclusion rider be made permanent?
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Study Notes
Impairment or Exclusion Rider
- An impairment (exclusion) rider is attached to insurance contracts to exclude coverage for specific pre-existing conditions, like back injuries.
- Riders can be temporary or permanent depending on the underwriter's decision when writing the contract.
- This rider allows individuals with existing impairments to obtain insurance at reasonable costs, despite exclusion of certain conditions.
- Example: A physician with a back injury can secure a disability policy, but it excludes claims related to back injuries; other disability claims are still covered.
- Terms of the rider are explicitly detailed in the policy, ensuring clarity on exclusions.
- Unlike most insurance riders that add coverage and cost, the impairment rider reduces coverage without decreasing the premium.
Guaranteed Insurability Rider
- Also known as the Future Increase Option or Guaranteed Purchase Option.
- This rider allows insured individuals to purchase additional disability income coverage without having to prove insurability.
- Option dates for additional purchases are typically set every two years, limited by a maximum age—commonly age 50.
- Premiums for newly purchased insurance amounts are determined by the insured's age at the time of exercise.
- To prevent over-insurance, a specific earnings test must be met before additional coverage can be purchased.
- Each option date usually has a cap on the amount that can be purchased, generally ranging from $500 to $5,000.
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